April 19, 2008

Buyer pays price for jilting agent

Earlier this month, the Ontario Superior Court of Justice released a decision
which highlights the obligations of parties signing a buyer-agency agreement.

In the fall of 2005, Helen Clubine was looking at properties in the
Orangeville area with her real estate agent Zoi Boussoulas.

By early January, 2006, Clubine had inspected a property known as Willow Hall
several times, and was finally ready to put in an offer to purchase it.

At the time the offer was being prepared and signed, Boussoulas presented
Clubine with a standard form buyer-agency agreement (now known as a buyer
representation agreement), which gave the broker exclusive authority to act as
the buyer's agent until June 30, 2006.

This form, which is commonly used in the real estate industry, provides that
the broker is entitled to be paid commission if the buyer enters into an
agreement to purchase any property, during the running of the agreement. If the
seller does not pay the commission, or all of it, the buyer is required to pay
it.

The form also has a holdover clause which entitles the broker to commission
if the buyer, within 180 days after the agency agreement expires, enters into an
agreement to buy a property shown or introduced to him or her by the agent while
the agreement was in force.

In paragraph 4, Clubine agreed: "if I fail to advise you of any property of
interest to me that came to my attention during the currency of this Agreement
and I arrange a valid offer to purchase the property during the currency of this
agreement or within the holdover period after expiration of this agreement, I
agree to pay you the amount of commission set out above."

A later amendment to the agreement set the buyer's agent's commission at 2.5
per cent.

Willow Hall was listed at $825,000 but needed major renovations. Clubine
instructed Boussoulas to prepare and submit an initial offer of $575,000. It was
rejected.

Eventually, Boussoulas submitted a final offer of $750,000, but the vendors'
bottom line was $765,000. The listing and selling agents offered to kick in
$10,000 of their commission, but by that time the buyer lost interest in it.

Clubine and Boussoulas had an "unpleasant" telephone conversation in the
aftermath of the transaction, and their friendship came to an end.

Clubine later purchased another property using a different agent, and that
fact came to the attention of Homelife/Vision Realty Inc., the company where
Boussoulas worked. Ken Kakoullis, the Homelife broker, wrote to Clubine advising
that she had breached the terms of the buyer-agency agreement, and owed his
company $21,774.50.

Clubine denied any responsibility for payment, alleging that Boussoulas had
orally agreed to terminate the agreement, and that it was not explained to her
that Clubine was responsible for paying commission if she bought another
property.

Eventually, Homelife/Vision sued Clubine for its lost commission. The matter
came up for trial before Justice Darla Wilson in March of this year, and her
decision was released earlier this month. Justice Wilson found no fault with the
actions of the real estate agent.

"The evidence establishes that she is an experienced real estate agent who
conducted herself in a professional manner throughout," the judge wrote in her
decision. "I do not accept the evidence offered by Ms. Clubine that she signed
(a buyer-agency) agreement without satisfying herself of her obligations under
that contract."

The judge concluded, "Ms. Clubine was angry that she did not get the Willow
Hall property for the price that she wanted and she blamed Ms. Boussoulas for
the outcome. She chose to enter into an agreement with another agent, which
resulted in the purchase of a property during the period of time covered by the
agreement with the Plaintiff and consequently, she owes the Plaintiff the 2.5
per cent commission which amounts to $21,774.50," plus interest and costs.

Buyer representation agreements have an important role in the real estate
process. The lesson of this case is that buyers should always be aware of their
risks and responsibilities when signing one.

ENDORSEMENT

[1]
The plaintiff is a
licensed real estate brokerage company and it brings this action under the
Simplified Rules for damages for breach of contract. On consent, at the
outset of trial, the counterclaim was dismissed without costs as was the
claim against the other defendants. The Plaintiff seeks payment of a
commission of $21,774.50 pursuant to a Buyer Agency Agreement entered into
with the Defendant Helen Clubine, who disputes that any commission is
owing. She alleges that the agent employed by the Plaintiff, Zoi
Boussoulas, was incompetent or alternatively, that the agent was negligent
and her actions breached her fiduciary duty to the defendant.

BACKGROUND

[2]
A statement of
agreed facts was submitted by counsel. The agent, Boussoulas, and the
defendant Clubine became friends in approximately 2003. Ms. Boussoulas
had been a real estate agent for approximately twelve years at that time.
Ms. Clubine was in the process of a divorce and wished to sell her home in
Newmarket and relocate further north. In 2004, Ms. Boussoulas and Ms.
Clubine looked at some houses in the Sharon, Ontario area.

[3]
In the fall of 2005,
Ms. Clubine told Ms. Boussoulas that she was interested in looking at
rural properties in the Orangeville/Adjala/Mono area and requested her
assistance in this endeavour. She advised her that she had approximately
$750,000 to spend on a house but that she would not be in a position to
make an offer until early 2006 as that was when her divorce would be
finalized and she would receive her settlement funds.

[4]
Commencing in
September of 2005, Ms. Boussoulas and Ms. Clubine were exchanging e-mails
concerning properties in the desired area and both agreed that they looked
at 4-5 properties between October and December of 2005. Ms. Boussoulas
also entered the defendant s e-mail address into a computer programme that
searched for properties that matched the criteria the defendant was
looking for and automatically sent e-mails to Ms. Clubine for her perusal.
The defendant would then advise Ms. Boussoulas which properties she was
interested in viewing.

THE EVENTS IN 2006

[5]
In early January
2006, Ms. Clubine asked Ms. Boussoulas to take her through a property in
Adjala/Mono known as Willow Hall. Ms. Boussoulas contacted the vendor s
broker, John Dunlap, and Ms. Clubine went through the house accompanied by
the defendant s boyfriend, Brent Rogers. Ms. Clubine testified that the
property was stunning but the house was a disaster . Consequently, her
boyfriend arranged to have an architect, an engineer and a project manager
of construction view the house and property so that she could determine
how much it would cost to bring the house to an acceptable condition. Ms.
Clubine decided to put in an offer to purchase Willow Hall.

[6]
Ms. Boussoulas
testified that there is a standard Buyer Agency agreement that is used by
the Toronto Real Estate Board which gives a broker exclusive authority to
act as agent for an individual for a specified period of time. This
standard form agreement has blanks that are filled in to identify the
property type and the geographic location. Paragraph 2 stipulates that the
broker is entitled to be paid commission if, during the currency of the
agreement, the buyer enters into an agreement to purchase any property.
Furthermore, the agreement provides that a buyer will pay the broker
commission if they enter into an agreement within 180 days of the
expiration of the agreement (holdover period) for a property shown or
introduced to the buyer during the period of the agreement. Paragraph 4
of the agreement requires the buyer to advise the broker of all offers to
purchase properties submitted by the buyer during the course of the
agreement and states:

if I fail to advise you of any property of
interest to me that came to my attention during the currency his Agreement
and I arrange a valid offer to purchase the property during the currency
of this agreement or within the Holdover period after expiration of this
agreement, I agree to pay you the amount of commission set out above
(emphasis added).

[7] Ms.
Boussoulas testified that the agent must have the buyer sign the Buyer
Agency Agreement prior to an offer to purchase being submitted. In the
case at hand, she did not have Ms. Clubine sign the agreement when she
first commenced showing her properties because they were friends and she
trusted her. She showed her various properties in the fall of 2005 without
asking for the agreement to be signed but she was aware the defendant was
not in a position to make an offer because her divorce was not finalized.

[8]
After several
viewings of the Willow Hall property, Ms. Clubine decided that she wished
to make an offer to purchase. Therefore, on February 1, 2006 Ms.
Boussoulas met with Ms. Clubine and presented the Buyer Agency agreement
for signature as well as the Working With a Realtor document. Ms.
Boussoulas testified that she went over the agreement with Ms. Clubine and
explained that the agreement was an exclusive one and she would be
entitled to a commission even if Ms. Clubine bought a house through
another agent or during the holdover period. Ms. Boussoulas testified that
she had no doubt that Ms. Clubine was aware of the contents of the
agreement she was signing.

[9]
Ms. Clubine denies
Ms. Boussoulas s version of events. She testified that Ms. Boussoulas
presented the Buyer Agency agreement to her along with the Working With a
Realtor form and did not explain either to her but simply asked her to
sign them. Ms. Clubine acknowledged that she is an experienced
businesswoman and her job it to sell and lease very expensive cars.
Indeed, her employment involves the negotiation of contracts with
sophisticated individuals who are high income earners. Nonetheless, she
testified that she did not read the agreement and signed it because Ms.
Boussoulas told her to and she trusted her. She acknowledged that she
was aware that Ms. Boussoulas would receive a commission of 2.5% from any
purchase made but thought that she was not responsible for paying it, even
though the agreement is clear on this point.

[10]
I find as a fact that
Ms. Boussoulas reviewed the agreement with the defendant and explained its
exclusive nature and the obligation to pay commission if any property was
purchased during the period of the agreement or during the holdover
period. In preferring Ms. Boussoulas s evidence on this point to that of
Ms. Clubine, I am influenced by the following factors:

[11]
Ms. Boussoulas struck me
as a reliable witness. She appeared to be an honest historian with a good
recall of the salient facts.

[12]
Having observed Ms.
Clubine s demeanour during the trial, I conclude that she is forceful and
aggressive and I do not find as a fact that she would sign a legally
binding document dealing with the purchase of a property worth in excess
of $750,000 without first reading it.

[13]
Ms. Clubine and her
boyfriend who gave evidence, Brent Rogers, testified that Ms. Boussoulas
often appeared inebriated at showings of houses, slurring her words and
acting in an unprofessional manner. However, the evidence John Dunlap, a
broker who was involved in negotiations with Ms. Boussoulas on one of the
properties on behalf of the defendant and who has no reason to mislead to
court on behalf of the Plaintiff testified that at all times, Ms.
Boussoulas conducted herself in an entirely appropriate manner and he
never saw any evidence of intoxication.

[14]
Further the broker of
the Plaintiff, Ken Kakoullis, testified that Ms. Boussoulas worked for him
for more than 13 years and in that period of time, he has never had a
complaint about the quality of her work, nor did he ever observe that she
had a problem with alcohol. I do not find the evidence of Ms. Clubine on
this issue to be reliable and I view it as an attempt to discredit Ms.
Boussoulas.

THE WILLOW HALL
PROPERTY

[15]
The Willow Hall property
was listed for $825,000 and both Ms. Boussoulas and Ms. Clubine agreed
that the price was high. Consequently, Ms. Boussoulas secured details of
other properties in the area and exchanged them with the listing broker
John Dunlap in an effort to determine what an appropriate selling price
might be. After being advised by the architect who viewed the property
that it would cost at least $250,000 to bring the house up to an
acceptable condition, Ms. Clubine, with input from her boyfriend Mr.
Rogers, decided to submit an offer of $575,000. It was clear that the
price contained in the first offer to purchase for Willow Hall was decided
by the defendant and her boyfriend with little input from Ms. Boussoulas.
Ms. Clubine instructed Ms. Boussoulas to draft an offer.

[16]
Ms. Boussoulas met
with her broker, Ken Kakoullis, and obtained his input as he had been in
the real estate business for more than 30 years. Ms. Clubine testified
that Ms. Boussoulas provided no assistance in drafting the offer of
February 1, 2006 and that she relied on her boyfriend, Brent Rogers, to
advise her on what terms. ought to be included in the offer. I do not
accept this evidence as being accurate. Ms. Boussoulas had been in the
real estate business in excess of 15 years at that point and would have
been capable of drafting an offer to purchase a residential property. I
accept her evidence that she discussed the contents of the offer with her
broker, Mr. Kakoullis, as it was a rural property and he had more
experience in that area than she did.

[17]
The vendors of Willow
Hall did not sign back the offer of $575,000, which is not surprising
given that the listing price was $825,000. Ms. Boussoulas continued to
show Ms. Clubine other properties in the area and Ms. Clubine received the
computer generated prospect matches for review. Ms. Boussoulas continued
to be in contact with the vendor s broker, Mr. Dunlap concerning the
Willow Hall property. Ms. Clubine testified that after having viewed a
number of properties, she decided she wished to put in another offer on
the Willow Hall property and she contacted Ms. Boussoulas.

[18]
At this point, Ms.
Boussoulas realized that the initial Buyer Agency agreement that had been
signed February 1, 2006 contained an error because it stipulated the
amount of the commission was 0%. This was a typographical error that had
been made by the secretary who typed the document. Therefore, Ms.
Boussoulas gave evidence that she showed the mistake to Ms. Clubine and
requested that she sign a corrected version of the agreement which was
identical in every other respect but had the correct commission of 2.5%
inserted. Ms. Boussoulas testified that she explained the error to Ms.
Clubine who signed the corrected agreement. Ms. Clubine did not dispute
this, but stated that she did not realize that she was responsible
for payment of the commission. I do not accept that Ms. Clubine signed
the second Buyer Agency agreement without reviewing it. In addition to
her experience in the business world, on her own evidence, by that point
she had lost confidence in the abilities of Ms. Boussoulas so it is
unlikely she was relying on the representations she made with respect to
the agreement.

[19]
Further offers were
exchanged between Ms. Clubine and the vendors over several days.
Eventually, Ms. Clubine made an offer of $750,000 and Mr. Dunlap advised
Ms. Boussoulas that his clients needed 48 hours to consider the offer as
one of the vendors, the mother, resided in Australia and wished to review
the offer. Mr. Dunlap advised Ms. Boussoulas that perhaps an agreement
could be reached between the parties for a price of $760,000. Ms.
Boussoulas imparted this information to Ms. Clubine.

[20]
However, after the
mother reviewed the offer, she decided that her bottom line was $765,000
and this was the final offer back by the vendors. This event appears to
have enraged Ms. Clubine, who blamed Ms. Boussoulas for not securing a
power of attorney from the mother. It is clear that the power of attorney
was not responsible for the transaction falling apart. I found Mr. Dunlap
to be a credible witness who has a great deal of experience in the
purchase and sale of properties in the area of Mono/Adjala. He has no
reason to favour either party in this lawsuit. Mr. Dunlap s testified
that the power of attorney could have been secured but the reason the deal
fell apart was because the parties could not reach a consensus on a sale
price: Ms. Clubine was not prepared to offer $765,000 and that was the
vendor s bottom line.

[21]
Ms. Clubine was
infuriated that she did not get the Willow Hall property for the price she
wanted. She acknowledged that both the vendor s broker and Ms. Boussoulas
offered to decrease their commission so that she would, in effect, get the
house for the price that she wanted and the deal would not be lost over
$5,000.However, Ms. Clubine was not prepared to do this and in her words,
the house was poison to her at that point.

THE AFTERMATH

[22]
She called Ms.
Boussoulas and there was an unpleasant exchange on the phone which marked
the end of their friendship. Ms. Boussoulas recalled that Ms. Clubine was
abusive to her during this conversation and swore at her. She told her
that she was not interested in making another offer on the Willow Hall
property. Ms. Boussoulas believed that Ms. Clubine was upset about not
being successful in her bid on the property so she decided to give her
some time to cool off . She denied that Ms. Clubine told her that she no
longer wanted her to act as her agent nor did she ask to terminate the
Buyer Agency agreement. Ms. Boussoulas was aware that she did not have the
authority to terminate an agreement, only her broker, Mr. Kakoullis, could
do so. A few days later she left a message for the defendant, which was
not returned.

[23]
Some weeks later the
defendant s boyfriend, Brent Rogers, called Ms. Boussoulas and advised
that he was signing with another agent. She advised him that he was free
to do so but that Helen Clubine was her client and was bound by the
agreement that she had signed. After this conversation, Ms. Boussoulas
did not think that Ms. Clubine was going to sign an agreement with another
real estate agent. She believed that Mr. Rogers would likely enter sign an
agreement with another agent and purchase a property for both of them.

[24]
As a result of her
discussion with Mr. Rogers, Ms. Boussoulas decided not to contact Ms.
Clubine again. She told her broker Mr. Kakoullis what had transpired.
While it would have been preferable for Ms. Boussoulas to have sent Ms.
Clubine a letter confirming her obligations pursuant to the contract after
the breakdown of their relationship, I accept her evidence that Ms.
Clubine was aware of her responsibility to pay a commission to the
Plaintiff if she purchased a property but that she would likely avoid
doing so by having her boyfriend buy the house.

[25]
In her evidence, Ms.
Clubine acknowledged that she never told Ms. Boussoulas that she wished to
terminate the Buyer Agency agreement that she had signed. Nonetheless,
she continued to review properties on MLS and continued to receive the
prospect matches from Ms. Boussoulas. She testified that because she did
not want to speak with Ms. Boussoulas, she asked her boyfriend Mr. Rogers
to contact her to advise that their agreement was terminated. She stated
that he did so and told Ms. Clubine that Ms. Boussoulas was fine with
it. I reject the evidence of Ms. Clubine and Mr. Rogers on this point. Ms.
Clubine clearly knew that she was obligated to deal with Ms. Boussoulas
exclusively until June 30, 2006 pursuant to the agreement and that she
would be owed a commission from any purchase of a property during that
period and that is why she asked her boyfriend to contact Ms. Boussoulas.
Given Ms. Boussoulas s evidence (which was confirmed by Mr. Kakoullis),
that she did not have the authority to terminate a buyer agency agreement,
I do not accept that she would have simply agreed with the request of
Brent Rogers. Rather, I accept the evidence of Ms. Boussoulas on this
point, that she confirmed that Ms. Clubine was bound by the agreement she
had signed, although that did not prevent Mr. Rogers from purchasing a
property from another agent. It is not disputed that Ms. Clubine failed
to advise Ms. Boussoulas of the fact that she had purchased a property
during the term of their agreement.

[26]
The fact that the
defendant had purchased a property came to the attention of the Plaintiff
and on October 20, 2006 Mr. Kakoullis wrote to Ms. Clubine to advise that
she had breached the terms. of the Buyer Agency agreement and that she
owed the Plaintiff the sum of $21,774.50 in commission. In response, Ms.
Clubine telephoned him and requested a copy of the agreement, which was
faxed to her on October 20, 2006. Subsequently, on October 27, Mr.
Kakoullis had a discussion with Ms. Clubine and he made notes during the
conversation. Ms. Clubine was critical of Ms. Boussoulas, alleging she
had a drinking problem and did not negotiate the deal appropriately. She
informed Mr. Kakoullis that she dealt with contracts on a daily basis and
was comfortable with them. She did not suggest that the Buyer Agency
agreement of February 1, 2006 had been terminated.

[27]
It is conceded that the
commission has not been paid by the defendant. The explanation offered by
the defendant is that Ms. Boussoulas was incompetent and that she
misrepresented who was responsible for payment of the commission and
because of this breach of her fiduciary duty to the defendant, she
disentitled herself to a commission or alternatively, that Ms. Boussoulas
agreed with the termination of the Buyer Agency agreement.

[28]
I do not find that Ms.
Boussoulas was incompetent in the services that she provided to the
defendant. To the contrary, the evidence establishes that she is an
experienced real estate agent who conducted herself in a professional
manner throughout. She showed the defendant a number of properties,
negotiated with John Dunlap for the purchase of Willow Hall and appears to
have worked diligently on behalf of Ms. Clubine. The reason the deal was
not concluded was because Ms. Clubine decided she did not want to make a
further offer on the property. That was her prerogative, but she cannot
blame Ms. Boussoulas for the fact that she was unsuccessful.

[29]
There is no reliable
evidence that Ms. Boussoulas breached the fiduciary relationship so as to
disentitle her to a commission. As I have indicated, I find that the
defendant is a sophisticated businesswoman and I do not accept the
evidence offered by Ms. Clubine that she signed an agreement without
satisfying herself of her obligations under that contract.

[30]
Ms. Clubine was angry
that she did not get the Willow Hall property for the price that she
wanted and she blamed Ms. Boussoulas for the outcome. She chose to enter
into an agreement with another agent which resulted in the purchase of a
property during the period of time covered by the agreement with the
Plaintiff and consequently, she owes the Plaintiff the 2.5% commission
which amounts to $21,774.50. The Plaintiff is entitled to prejudgment
interest pursuant to the Courts of Justice Act from June 28, 2006. The
defendant shall pay to the Plaintiff its costs. If the parties cannot
agree on costs, written submissions shall be made within 30 days of the
release of these Reasons.

Wilson D.A., J.

Released:
April 9, 2008

Bob Aaron is a Toronto real estate lawyer. He can be reached by email at bob@aaron.ca, phone 416-364-9366 or fax 416-364-3818.Visit the Toronto Star column archives at http://www.aaron.ca/columns for articles on this and other topics or his main webpage at www.aaron.ca.